Markey Seeks to Extend Tax Credits for Offshore Wind

12 May 2017

The area along the coast of New England is considered the Saudi Arabia of offshore wind. However, the federal tax subsidy designed to jump-start production of ocean wind energy will soon be drying up.

On Thursday, Massachusetts U.S. Sen. Ed Markey introduced a bill to extend the credits for an additional six years. But that effort faces stiff headwinds.

Building offshore wind farms is expensive. Even among industry execs there's a joke that power is produced not by wind, but by government subsidies and tax credits. For example, in northern Europe, where the modern offshore wind industry was pioneered decades ago, it was only this week that plans for the first zero-government-subsidy projects were announced.

Here in the U.S., investors in offshore wind currently get a 30 percent tax credit. That's supposed to help the industry in Massachusetts, where the state is mandating production of 1,600 megawatts of offshore electricity over the next decade -- power for more than a million homes.

Lars Pedersen is head of Copenhagen Offshore Partners. The Danish company wants to build wind farms off the coast of Massachusetts, as it's done for decades in Europe. He says federal tax incentives are important to get the industry started here.

"It's a competition here in Massachusetts between three companies," he said. "We will have equal opportunities to tap into tax credits, so certainty about how it's going to phase out or how it's going to remain, that's a key component of how we develop our business."

But none of the wind farms now being planned off the New England coast will be built in time to take advantage of the federal tax credit subsidy, which ends in 2019.

Thomas Brostrøm is general manager of DONG Energy North America, another Danish company interested in building wind farms off Massachusetts' coast. And while the wind blows strong and steady here, he says subsidies are needed help create the industry supply chain infrastructure -- factories to build blades and turbines.

"That is the missing piece right now," he said, "because you've got great wind speed, shallow water depth, you can deploy the same technology, but the supply chain in many ways sits in Europe, but you can already feel the interest."

Massachusetts invested $113 million and built a marine terminal in New Bedford anticipating the development of the offshore wind industry. The port was to be used to deliver parts and workers to construction sites at sea. The three companies competing for wind projects off the coast have all agreed to use the facility, including the two from Denmark, where wind farms have lead to a windfall -- billions in investments and thousands of jobs.

"That isn't going to happen overnight in Massachusetts or New England, but part of our goal is to become the Denmark of the North American offshore wind industry," said Stephen Pike, CEO of the Massachusetts Clean Energy Center.

When -- and if — the offshore wind industry takes off in Massachusetts depends on lowering the cost of producing and planting turbines in the ocean, and that's where the federal tax credits come in, helping to generate clean energy and jobs at sea and on land.

"You need a lot of local folks with that kind of capabilities, so former fisherman or ex-military people, they are great in working in offshore environments," Pedersen said. "And these kind of skills you can find here, made in America."

The United States is already the world's leading producer of wind energy on land. Texas is the largest generator among states, but the Trump administration is unlikely to back Markey's call for extending the offshore wind tax credits.

Former Texas Gov. Rick Perry, now the head of the U.S. Department of Energy, has ordered a study of offshore wind, questioning its effect on the reliability of the electric grid, suggesting the intermittent nature of offshore wind could pose a risk to national security.

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